EDP Notes

1) Large Employment Opportunities: MSMEs are generally labour-intensive. For every

Rs. 1 lakh of fixed investment, MSME sector provides employment for 26 persons as against 4
persons in the large scale sector. Thus in a country like India where capital is scarce and labour is
abundant, MSMEs are especially important.

2) Economical Use of Capital: MSMEs need relatively small amount of capital. Hence it is
suitable to a country like India where capital is deficient.

3) Balanced Regional Development: Generally small enterprises are located in village and

small towns. Therefore it is possible to have a balanced regional growth of industries. India is a
land of villages.
4) Equitable Distribution of Income And Wealth: It removes the drawbacks of
capitalism, abnormal profiteering, concentration of wealth and economic power in the hands of few
etc.
5) Higher Standard of Living: MSMEs bring higher national income, higher purchasing
power of people in rural and semi-urban areas.
6) Mobilization of Locals Resources: The spreading of industries even in small towns and
villages would encourage the habit of thrift and investment among the people of rural areas.
7) Simple Technology: New but simple techniques of production can be adopted more
easily by MSMEs without much investment.
8) Less Dependence on Foreign Capital: MSMEs use relatively low proportion of
imported equipment and materials. The machinery needed for these industries can be manufactured
within the country.
9) Promotion of Self Employment: MSMEs foster individual skill and initiative and
promote self-employment particularly among the educated and professional class.
10) Promotion of Exports: With the establishment of a large number of modern MSMEs in
the post independence period, the contribution of the small scale sector in the export earnings has
increased much.
11) Protection of Environment: MSMEs help to protect the environment by reducing the
problem of pollution.
12) Shorter Gestation Period: In these enterprises the time-lag between the execution of
the investment project and the start of flow of consumable goods is relatively short.
13) Facilitate Development of Large Scale Enterprises: MSMEs support the development
of large enterprises by meeting their requirements of inputs of raw materials, intermediate
goods, spare parts etc. and by utilizing their output for further production.